Commentary on Economics, Information and Human Action

“Free Market Fairness” and self-authorship

[NOTE: The following is an economist’s musings about philosophy, so if my philosopher friends can flesh out my argument and identify errors I’d be grateful. Also, this post is meant for you if you are interested in electricity regulation, so don’t just mark it as read because it’s philosophy ;-)! –LK]

Although I have not yet finished John Tomasi’s Free Market Fairness, I am very much enjoying the conversation about it in progress at the symposium on it at Bleeding Heart Libertarians. John’s project is laudable — rediscover and synthesize common ethical ground between the two dominant branches of classical liberal thought. Roughly speaking, the bifurcation into what John labels “libertarianism” and “high liberalism” arose out of John Stuart Mill’s argument for the treatment of economic liberty as less essential than other civil liberties. Mill’s argument is that “… in the sphere of liberty are activities that primarily concern only the individual, …” (Tomasi p. 29), while the other sphere, that of coercion, addresses activities that affect other people. Mill categorizes exchange and commerce as inherently social due to its “you need two to tango” essence, and thus places it in the realm of coercion and not of liberty. More substantively, as John goes on to explore, Mill did not think that exchange and commerce could “contribute to individuality” (Tomasi p. 30) or to the moral foundations of personhood in the way that other civil liberties do, such as speech, assembly, and so on.

Thus the two branches of thought bifurcate from the classical liberalism tree trunk: modern libertarianism, which prioritizes property rights and economic liberty as foundational to all other civil liberties (e.g., Rothbard), and high liberalism, which picks up Mill’s moral demotion of economic liberty and builds upon it to justify a substantial government apparatus for regulation and intervention in the private economic decisions of individuals, with the stated objective of designing a social system that will generate benefit particularly for the least advantaged in society (Rawls’ operationalization of the maximin principle). John’s book probes ways to find commonalities in these two branches. In part his argument is a reinvigoration of the original tree trunk — classical liberalism, with which in the 20th century (i.e., after the bifurcation) he identifies Hayek. Classical liberalism neither prioritizes nor demotes economic liberty, embodying the principle that there is only liberty, and that its manifestation in various aspects of human action and interaction should be treated as moral equals. John notes (p. 24) that

… classical liberals see these wide-ranging economic liberties as being especially weighty compared to other social values. … But classical liberals do not treat economic liberties as moral absolutes or as in any way more basic than the other fundamental rights and liberties.

In particular, in all of the realms of liberty the presumption should be toward respecting individual liberty, but recognizing from a consequentialist perspective that there may be net benefits from allowing some coercion, such as taxation and wealth transfer to provide resources for a social safety net (a policy that, for example, Hayek advocated).

But I want to focus on one specific insight in John’s book that will stick with me and change how I think about individual liberty and economic regulation: self-authorship (The specific semantics here may be common in philosophy, but they are new and exciting to me). Embodying a definition from Rawls, John defines self-authorship as (p. 40)

… the capacity to develop and act upon a life plan (whether that plan be individual, collective, or otherwise shared). People are life agents and their agency matters. As responsible self-authors, they have the capacity to realistically assess the options before them and, in light of that assessment, to set standards for a life of a sort that each deems worth living.

The flip side of self-authorship is the individual’s recognition that others are themselves responsible self-authors, and that each of us has a duty to respect that self-authorship to the greatest extent possible when designing social systems that will necessarily involve some degree of coercion. One way we can use this concept of self-authorship is as a way to interpret Mill’s original argument; to me, it looks like Mill was arguing that economic activity such as commerce and exchange does not fall within the realm of activity relevant to self-authorship. However, classical liberals argue, and John is arguing here, that economic activity is just as essential a dimension of self-authorship as speech, association, political representation, and other dimensions arising out of our core civil liberties. Consider how much of our moral capacity to act upon a plan as a responsible agent takes form and meaning through our work and consumption decisions. I see self-authorship as one essential strand that can synthesize across these two post-Mill branches, but such a synthesis requires some common ground agreement on the extent to which economic activity is important for self-authorship. I expect John will develop this in the chapters I haven’t gotten to yet.

Why should you care about this issue of civil liberties, economic liberty, and self-authorship if you are reading KP because you are interested in electricity regulation and technology? Regulation as implemented in electricity interferes with self-authorship for individuals in a range of roles, consumer and innovator in particular. One consequence of acting on self-authorship is innovation and technological change, which is a manifestation of human creativity and thus intimately connected to self-authorship. Furthermore, look back at John’s definition of self-authorship. Economic regulation of retail electricity markets removes individual agency in consumption choices, in production choices, and in innovation choices. By preferencing an increasingly obsolete engineering-driven top-down model of vertically-integrated infrastructure financing and retail service provision, regulation demotes individual agency and treats it as unimportant. Especially if you come to electricity from an engineering and/or a rate-making perspective you may not think often about the ethical foundations of the regulatory system we inhabit; here’s one ethical aspect of it that I think is worthy of your consideration. Technological change has made choice more feasible and potentially attractive to some consumers, and environmental concerns make consumer choice and awareness of fuel use implications more important. Thus a dimension of economic activity — the production and consumption of electricity services and the innovations interacting with those services — that used to be treated as a commodity/infrastructure transaction does have aspects of self-authorship to it that traditional economic regulation constrains. There are ethical implications of regulation.

Ironically, actually, one justification often offered for this regulatory system is to maintain uniform treatment of residential customers in a way that will ensure that prices stay low and stable for “vulnerable” consumers such as elderly and low-income consumers; this justification sounds Rawlsian. But it also does constrain the self-authorship of other consumers, producers, and innovators in ways that may make them worse off, and moreover, if those others were allowed choice and freedom of expression through their technology and energy consumption decisions, they may bring about a world in which new products and services actually drive down costs or create unanticipated value that could benefit those vulnerable consumers. Is that tradeoff worth it, ethically or economically?

I’m only a few chapters in, and I’m sure that the rest of the work will be just as thought-provoking and insightful.